Source: Finance Association
① Bitcoin's “halving” was finally completed last Saturday. J.P. Morgan analysts expect Bitcoin's price to fall after the halving due to the early pricing in the market. ② Analysts pointed out that the Bitcoin market is currently overbought, venture capital financing is sluggish, mining companies are facing declining revenue and may seek relocation or mergers. Although the market is optimistic about Bitcoin's price increase before the end of the year, there are downside risks in the short term.
Last Saturday, the market's long-awaited “halving” of Bitcoin was finally completed! Historically, the Bitcoin “halving” event has often been seen as a catalyst for Bitcoin's price increase, as a decrease in the supply of new bitcoins may increase their value.
However, in this “halving”, it may be difficult for Bitcoin to rise further — J.P. Morgan even predicted that after this round of “halving” is completed, the price of Bitcoin could plummet.
A “halving” will not necessarily lead to further gains
Bitcoin “halving” means that miners solve complex mathematical problems to verify transactions and receive half the amount of new bitcoins as rewards, thereby reducing the amount of new bitcoins entering circulation. This is a mechanism designed in the Bitcoin protocol to control the speed at which new bitcoins are issued. The “halving” usually occurs at a specific point in time set by the Bitcoin protocol, approximately every four years.
According to the data, at 8:09 on April 20, 2024, Beijing time, Bitcoin successfully completed its fourth halving at a block height of 840,000. The Bitcoin network's mining rewards were halved from 6.25 BTC to 3.125 BTC. The last halving occurred on May 11, 2020.
In previous months, markets generally expected this event to be a bullish catalyst for Bitcoin, helping the token reach a new all-time high in 2024. However, if we look back at past history, we will find that although the “halving” event is usually accompanied by large fluctuations in the price of Bitcoin, the price does not rise immediately after every halving, and sometimes the price is adjusted for a period of time after the halving.
And this time, J.P. Morgan's team of analysts such as Nikolaos Panigirtzoglou (Nikolaos Panigirtzoglou) said, “We don't expect the price of Bitcoin to rise after being halved because this benefit has already been digested. In fact, we think the price of Bitcoin will fall after being halved for several reasons.”
Several reasons contributed to Bitcoin's sharp decline
First, J.P. Morgan said that after soaring to a record high in March, the Bitcoin market is still in the overbought range. Panigitzoglu pointed out several indicators that can confirm this.
He previously stated in another report at the end of March: “The market is still quite optimistic about the prospects for a sharp rise in the price of Bitcoin before the end of the year. A large part of this optimism comes from the view that even if the supply of Bitcoin decreases after the halving event, demand for Bitcoin through spot ETFs will continue to grow at the same rate.”
J.P. Morgan also observed that despite the recent recovery in the crypto market, venture capital financing remains low, which is another negative factor for Bitcoin's price.
“We previously believed that the recovery in crypto venture capital inflows was a necessary condition for the continued recovery of the crypto market, so in our view, the slump in venture capital inflows since this year poses a downside risk.” J.P. Morgan wrote in the report.
Analysts say Bitcoin mining companies will be hit after the “halving”: some companies may choose to relocate to improve efficiency due to reduced mining returns, while others may merge with large listed miners.
The analyst wrote, “After the halving incident, some Bitcoin mining companies may also seek diversification into low energy cost regions such as Latin America or Africa, and deploy inefficient mining equipment to derive return value from these idle mining rigs.”
editor/tolk